New York Democratic Gov. David Paterson and California GOP Gov. Arnold Schwarzenegger are urging congressional leaders to rework the Medicaid financing in the Senate-passed bill. | AP photo composite by POLITICO

Blue state govs. rip Senate health bill

The governors of the nation’s two largest Democratic states are leveling sharp criticism at the Senate health care bill, claiming that it would leave their already financially strapped states even deeper in the hole.

New York Democratic Gov. David Paterson and California GOP Gov. Arnold Schwarzenegger are urging congressional leaders to rework the Medicaid financing in the Senate-passed bill, warning that under that version their states will be crushed by billions in new costs.

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After the Senate passed the bill in a Christmas Eve vote, Paterson said the expansion would leave New York $1 billion in the lurch. The state faces a $6.8 billion budget shortfall heading into the 2010 fiscal year.

“[I] am deeply troubled that the Senate version of the bill worsens what was already an inequitable situation for New York and I will continue to be an advocate on behalf of New Yorkers to ensure we are treated fairly by this critical federal legislation,” Paterson said in a statement.

In a letter to House Speaker Nancy Pelosi, Schwarzenegger wrote that the legislation would create a “crushing new burden” for a state with a whopping $20.7 billion budget deficit.

“When asked for my support, I was assured that federal legislation would not increase costs to California or include new unfunded mandates,” Schwarzenegger wrote. “Unfortunately, under nearly every scenario we can predict, the federal health care reform legislation being debated would cost California’s General Fund an additional $3 billion to $4 billion annually.”

The resistance from the governors of two Democratic megastates underscores the anxieties facing states as they grapple with the prospect of a massive expansion of the Medicaid program.

The problem is that New York and California, both of which already have expansive Medicaid programs, will pay a higher share of the new expansion costs than many other states that have traditionally limited coverage.

“The inequity built into the bill puts hardship on states and would put them in the position of making cuts to providers,” said Susan Van Meter, vice president of federal relations for the Healthcare Association of New York State.

Schwarzenegger warned that the Senate health care legislation could sink his state.

“As the partner responsible for implementing this program, I am telling you that our Medicaid program is already at the breaking point, and if federal health care reform is passed without addressing the underlying faults in the system, health care reform will fail,” Schwarzenegger wrote in his letter to Pelosi. “[I]f Congress fails to address the existing unfunded mandates and adds yet another layer, federal health care reform could collapse the very safety net system it seeks to expand.”